The focus of the new organization is the culmination of the past tens years of studying corporate innovation centers and the past four years looking at the development of regional innovation ecosystems across cities around the world. The work is ongoing documenting frameworks, patterns, and best practices that are being used. Decision support trees that highlight interdependencies and trade-off between approach options. While this information has resulted in methodologies for corporations and regions to incrementally develop new capabilities in the innovation realm, the internal focus has been on the collection of data and development of several book series that will explore in depth the approaches, trends, and nuances that have shaped the direction of approaches due to varying competitive conditions around the world.

After studying innovation centers across the USA and in other countries there are a number of similarities around critical success factors. While I find most regions have many of the building blocks in place, there are key differentiators why some regions develop faster than others.

Critical Success Factors

Regional Economic Development Plan: A shared agenda and prioritization is key for regional development. Most regions plans only encompass the existing state of programs and infrastructure. Many on constrained to a time horizon of an existing administration. A even fewer look at global trends in terms of what will be required regionally for businesses to have a competitive advantage in the global market. One common patterns that lead to these short comings exist around regions expecting this to be government lead. While gov/state involvement is a key player, many agencies are not funded or equipped to actually facilitate the overall strategic planning. Another pattern is small private entities spun up to support regional planning, but they tend to focus on the planning for the region internally and a best only looking at the local area they exist in. Two best practices have emerged, in the planning space. The first is the gov/state creates a private entity with public and private funding. A governance board is created spanning gov, corporate, academic, NGOs, & etc, to provide broad representation. Keep in mind broad means regional, not city or state scope of representation. This organization needs to not only lead the regional planning, but build out the next generation of business services and branding to help the region compete successfully. Teams of practitioners will be required to bring industry, market, and technology expertise into the creation, building and operations of the services. Large partnership networks spanning the globe will be engaged in the offerings. The scale of these organizations grows into the hundreds of people as the work is never done and they are in 24/7 business with not only their region’s organizations, but at the heart of global B2B business. A second option can also be pursued by regions that are trying to catch-up to the success of and competitive disadvantage they are experiencing. That is to employ one or more large scale existing economic development companies. These firms have the size and talent, plus are leading major projects in multiple regions. They have the network of global contacts to bring immediate B2B and investment into a region. While the first option is preferable for creating a long term asset to the region, the second can be combined to get a jump start and eventually evolve a regional organization over time.

Government investment: Most of the most successful models, while not government lead, did get started through government endorsement and funding. Having state endorsement, commitment, and initial funding was consistently been the key to trigger corporate leadership and investment.

Corporation Leadership & Investment: Corporations truly have played the leading role in developing the competitive advantage for regions. Until they step up the region will struggle to establish global competitive advantages around their inherent clusters. Investment takes the path of many forms. From pure capital to fund innovation center, mentoring start-ups, providing commercialization services, international partnership, internships & training, etc.

Co-Opition: Corporate lead consortiums collaborating to build global advantage. Many times this can be cluster based, but there is also great possibilities in adjacent and cross industry collaborators. Top innovation centers are producing joint ventures and joint patents through providing B2B collaboration opportunities with partnerships around the globe. Start-ups at the centers are maturing quicker with less time and cost, plus the mentorship and commercialization support of the corporate members. Universities and other academic and research institutions can bring their experience to bare at the nexus of these innovation centers.

New Investment Models: New investment models are required regional to support and attract start-ups, talent, and external venture capital. This span a full gambit of philanthropic, consortium fund of funds, members & subscription models. These models all serve different purposes in the innovation centers supporting a host of integrated programs. I’ll detail out each of the types and how they fit together in a future blog. While philanthropic is probably the smallest form of investment for the center model, in the beginning philanthropic support is critical to launch the centers, build the teams, and put the operational capabilities in place. Regions need to adopt a pay forward investment mentality to create a new competitive playing field that attracts invest, innovation, talent, partners, etc. The differentiation of pure venture capital and early stage funding is only a part of regional development. The capabilities and assets of the region must be developed in parallel to the direct investment in innovation itself.

Proven Patterns: Many regions have tried to build the start-up community, but the success regions with innovation centers where focus on true economic development. Building a model that centered on corporate co-opitition and collaboration supported by universities and government agencies creates a support systems that can hugely benefit start-up funding, acceleration, incubation, and commercialization. Too many approaches have been start-up centric and simply tossing out a few events, contests, and a few small accelerators in a region has not lead to cultural shift in the region and it eventually runs out of energy.

A theme running through all of these success factors is Leadership. Government agencies need to lead the call for regional development but ultimately it is the Corporations that need to learn to collaborate through co-investment in the capabilities of the region. They are the ones that need to change what is possible for their cluster, adjacent clusters, and start-up ecosystem to thrive and become the brand that attracts more opportunity to the region. The key role for the government is the public call to action, cross administration commitment to regional development, empowerment of an independent entity to drive the business, and lastly the basic capital to attract other investment to start. In every model of public & private funding, the public money starts the investment and is quickly dwarfed by the extent of private money that sustains the model.

There are leaders and followers in every market. There is no need to invent the wheel. These models and centers already exist around the world and can be replicated. The challenge is the leadership cannot. It must be found within.

This month I had the chance to visit the one of the Innovation Centers in Milwaukee Wisconsin. The Global Water Center is the first of many cluster-focused centers launched in Wisconsin over the past few years. Wisconsin has taken the lead in development of these centers in partnership with federal gov, state gov, and leading corporations. They now serve as a model for other states that seek to replicate their success. Below I have condensed many of the learning’s from visiting the center to pass along. Wisconsin’s success vastly exceeded all expectations.

Goals:

Create regional advantages for competitive advantage

Be a global leader to attract investment and relocation to region

Have a global brand

Be first to market to set the standard

Be first to build to capitalize on government, academic, and investor funding sources before it is common practice

Consortium engagements of cluster companies at the heart of economic model

Maturity of strategy and approach is attracting increasing support and investment ( gravity )

Creation of WEDC (5 year journey from idea to regional advantage)

Created 2011 from the State Department of Commerce as a separate 501c3 built to operate like a business focused on the development of the states innovation ecosystem

It does not report to the state or legislature, but has board members from state, industry & academia

Organization is already over 100 employees and growing focused on regional development and building global network

State funding created the organization building initial team, planning, building network of sponsors, and operational capabilities

Once state dollars where committed, companies rapidly joined and sponsored build out of services and facilities

Once underway they qualified for Federal grants across a broad spectrum: Innovation, job creation, and urban revitalization

Corporate & Startup tax incentives from state

Initial corporate sponsors where contributing $8M – $10M each for the build out of the centers and industry parks

Within a year they were raising $30 for each $1 the state contributed

Within three years they were raising $70 for each dollars the state contributed

Initial Pilot Center

Water Council – industry association formed years ago to build out network of leading companies globally

Water Tech 1 Building / Global Water Center Building is 2 yrs old; 100,000 sq/ft – 7 floors of Class A space

Water Tech 2 Building / Designed with construction to start this year; Class A space

Water Annex Building / Class B Incubation space where selected startups coming out of the Accelerator graduate to

Water Industry park / Corporations building facilities from HQs, Labs, and Manufacturing near center

Results to Date

Global Water Center (Water Tech 1) was opened in 2013 with Class A space, high tech labs, auditors and meetings rooms. By 2015 the seven floor center was completely full with over 40 corporations offering in the facility with dedicated staff

Regional, National, and Foreign demand has required Water Tech 2 to launch construction to house more corporations

Many corporations are building out facilities in the industry park

Corporations from Netherlands, Korea, China, Singapore, France, etc. Looking to join center and build international corridors for start-ups to be funded to come over

Several large corporations, who were early skeptics, have already relocated their headquarters into the industry park with considerable expense because of the competitive advantage they see in participating

MN companies are participating – Wisconsin is now the leader in the water cluster

8+ academic institutions are members providing many levels of training in water science, entrepreneurship, etc.

Corporations are funding industry events

Venture capital and angel networks are now integrated; major investors like JP Morgan are participating

They are attracting new venture capital from other regions

In three years over 19 joint patents have been created by B2B collaboration

The start-up accelerator hosts cohorts of start-ups in the facility with services supported by the center, academic partners, and corporate partners

Start-ups that are selected from the cohorts are sponsored into the new Water Annex that is a new Class B office facility

Many other adjacent industries are now coming into the region

Revitalize Walker point district in Milwaukee over $211M invested in surrounding neighborhood + job creation

Many of the neighborhood buildings are being renovated to host a variety of business

Lifestyle business of food, entertainment, shopping and housing are spring up all around the area

They are attracting young talent from the regions

The model is working so successfully they are already launching 8+ more centers with others being planned

Other states and countries are seeking them for help to build the model in their regions

Real Estate Investments around a single center:

Centers in development

Global Water – initial pilot launched 3 years ago in Milwaukee

Energy & Power – Milwaukee

Aviation & Aerospace = Oshkosh

Advanced IT – Madison

Bio Science – Madison

Food & Beverage – Milwaukee

Centers in planning / consideration phase

Internet of Things – Madison

Agriculture – TBD

Insurance / Financial – Madison

Academic & Professional Institutions already providing services

University of Milwaukee

University of Madison

University of Whitewater

Marquette University

School of Fresh Water Science / new $50M facility built in MKE / 1 of 3 in USA

Multiple Law Firms

Multiple IP Firms

Multiple Account Firms

Wisconsin advantages – from their perspective

Wisconsin has tremendous assets in industries, education, national resources and culture

Wisconsin has a regional economic development plan & shared agenda in place and evolving

Wisconsin has removed tenure from state law; academic institutions are evolving their business model and generate value to the ecosystem

Wisconsin will be the leader in multiple clusters as a global brand

Leadership

Key Learning’s

State commitment and basic investment was the critical trigger for corporate and federal funding.

The state created an independent business to create the ecosystem centers – WEDC

They built a 100+ person business to create centers and create the partnerships

It was corporate leadership through participation, planning, and funding that actually made it a reality. The leading companies of the region, to establish Wisconsin as the Global Center for Water, invested millions of dollars

The centers were built as businesses for accelerating business & competitive advantage; they are already leveraging a 70:1 investment ratio. Industry is now leading the state’s economic development.

While they may be already 5 years ahead in formation from Minnesota, Wisconsin is accelerating rapidly into multiple clusters simultaneously. This process will go much faster than the building out and selling of the original concept. In another 5 years they will be relatively 15 years ahead.

I attended the 2014 Minneapolis CDO Executive Summit as a guest of the MN State CIO and Director of Innovation. The event featured an extensive number of speakers sharing their experiences in establishing practices around data aggregation and analytics. The real world perspectives from corporate professions was very insightful to the challenges and levels of investment required to make these initiatives successful. As I’m currently working on extensive models around data & analytics regarding economic development and innovation metrics I found the networking opportunities at the event invaluable and have led to a number of working groups that continue on since the event.

The event resonated with the years of experience I spent on strategic initiatives with companies, specifically in the areas of building the data analytic organizations and systems. Here is a quick top 10 considerations I constantly ran into:

These are new capabilities that have to be developed. Not to be confused with existing IT data organizations that are maintaining operational systems. It takes more time, money, and commitment than most organization understand and will require most areas of the company to participate vs. an isolated team approach.

Funding the practice will span not only technology, but a wide range of skills sets from data architecture, system integration, analytics, etc. Many companies underestimate the amount of time/cost business subject matter experts will need to be involve and participate in developing the insights that come from the analytics.

While existing system integration seems like a large task, there is a significant amount of information and meta data that your organization has NOT been capturing over the past decades. One mitigation approach is to find strategic partnerships that can leverage their data to create combined data sets that are vastly more valuable than a single organization and can cover history data gaps.

Integrating to public data sources is a vastly under utilized resource. Many state governments are working to improve systems, apis and crowdsourcing efforts to create more value out of this data. I have also seen companies create portions of internal data and created their own public share. This has paid big dividends in terms of the crowdsourcing solutions that have come out of that data and the strategic partnerships that it has attracted.

An organization should not under estimate the value of analytics of data outside of ones core customer demographics. It might be the key to understand what you don’t know about the market and customer needs.

Channel data is a frequent point for data collection investments, but many orgs fail to capture the data for cross channel analytics.

Look past just the data in the channel, but into the value chain of systems, orgs, and partners that the channels trigger. Many organizations do not understand the operational considerations that channel activation puts on their own organizations. Especially when adding new channels.

Partner and supply chain data is a great source of understanding the capabilities of your partners during times of crisis, economic instability and market disruptions. Look for those anomalies to understand how better to support the strengths and weaknesses in your own business ecosystem. Pilot additional partners to compare performance and capability variences.

While many companies are focused heavily on the business analytics, perhaps of of the biggest areas of corporate improvement comes from the aggregation and analytics of internal collaboration of systems and departments. I’ve seen great organization strategies come from the study of internal communication, spending, budgeting, governance, project planning, and project outcomes metrics just to name a few. How good a dashboard to you have in watching organizational behavior and performance over time. What data are you not capturing about your own organization today?

One of the most frequent differences that I found working crossed thousands of organizations was the fact that companies didn’t really understand the maturity levels of their competition in this area. Most companies would attend a conference and come away feeling that everyone was struggling with similar problems. While this is likely true, they where missing the point that other orgs had already committed significant investment to the aggregation of data even though they where still very immature in their capabilities to exploit it. In many cases they didn’t realize their competition already had gained years of data collection in new and strategic data partnerships and they hadn’t even begun yet. Most fail to consider the value of time in terms of data collection. It is hard to go back in time and get the data you failed to capture and your falling behind every day that passes.

In future blogs I will dive more deeply into each of these considerations to explore how different organizations approached each area and what outcomes came for their efforts.

The Federal EDA, Harvard, MIT, and UMN had teamed up around big data analysis on US industry clusters. This was a two day event (09/29/14 – 09/30/14) showcasing a broad range of speakers and case studies of cluster development. For a number of years they have been collecting data on the current state of industry across cities in the USA. The high level data starts to identify strong concentration of cluster assets by geography and creates a basis for measuring the effectiveness and growth ( or decline ) of regions. The Federal EDA and Small Business Association have created grant programs to help regions develop their clusters. Already many cities have capitalized on these government investments and begun programs and have created innovation centers / parks to bring clusters together in new ways and around joint collaboration and co-opition.

Harvard Professor, Micheal Porter, gave a presentation with practices for reshaping clusters and highlighted the work he has been involved with developing the Life Sciences cluster in Massachusetts. Some of the best practices he highlighted included:

The case study examples where interesting and great to hear them presented directly the teams leading the initiatives. Ecolab CEO Doug Baker presented a very interesting cluster collaboration that spanned multiple states and adjacent clusters that included water, energy, and agriculture. This highlighted that the potential of clusters is just not within the scope of a single city, but in the interconnection of key partners that may span state boundaries. This concept was reinforced later in the year seeing states applying for the federal grants together in unified proposals. The example also highlighted the power supporting adjacent clusters. This allowed corporations from adjacent vertical sectors to partner in new ways and create business opportunities through combining assets, technology, and processes.

Regional economic development practices where discussed and it highlighted the wide variety of approaches adopted by groups and some of the trade off to the approaches. For example:

Some regions don’t have strong leadership and lack any regional development plan, much less a shared vision. This is worst case scenario, but can be common

Regions that have long standing clusters, but struggle to maintain their lead. They focus on keeping parity though this tends to ultimate lose the lead and invest enough in creating competitive advantage

A region could focus on a new and emerging cluster, but that is a very competitive space. Success would really hinge upon the actual strength of regional assets to support that industry. This can be a very costly investment only to not sustain the lead in the long run against another region with inherit more advantages

Regional investment in generic infrastructure can also be an expensive but unsuccessful strategy. Building generic industry parks, start-up spaces, and industry support systems can turn into a bust without a clear and focused plan.

The opposite of generic infrastructure though would be an approach to build cluster specific infrastructure that creates a unique and differentiated assets for the region resulting in a clear competitive advantage. Example of these can be innovation center campuses that integrate industry, start-ups, universities, research parks, that have common infrastructure around shared labs, manufacturing, supply chain, education and commercialization.

One aspect of cluster development that paves the way is the development of supportive government policy in the region to create business opportunities, align government investment, and create incentives. This can be a huge factor in terms of attractiveness to the region for internal and external investment and the attraction of talent and ideas. While government plays a key role, it doesn’t mean a region can only be lead by government agencies. In most case the agencies are not staffed or funded for extensive economic development programs and these programs have to last past any given administration. Some of the most success case studies of cluster development are lead by private organizations that are built and dedicated to the mission. It still takes government, industry, education, start-ups, venture capitalists, etc to be all contributing, but much of the facilitation can come from private firms. Two red flags I’ll immediately raise in this conversation are as follows:

There can be more than one private firm involved. Regional transformation is an enormous, and though a shared vision is required, the work and easily and probably be better severed by a number of focused organizations that can sustain long term.

There is a difference between leadership and control. A leading organization can lead through delegation. A clear flag of a failing economic development organization is one that seems to take control of everything. Its a stewardship model vs. dictator model that is needed for scalability and sustainability.

CHEVAL insight looking into regional cluster selection also brings a variety of approaches:

One can begin by looking at what the region is already known for and has in abundance. Next one would have to compare the regions current success and competitive differentiators against any other regions that are in that space. In too many cases a region that pioneers a field becomes comfortable at the lead and fails to see others gaining on them until it is too late. Keep in mind that the individuals who probably created the industry tend to retire and turn it over to the politicians in their companies, so its not surprising that the decline of industries sectors in a given region over time.

Studying your areas of strength, then exploring the strength you have in adjacent industries could also be a opportunity in waiting. In many cases these have grown up independently and could be at a maturation point where stronger cross sector integration can create dynamic opportunities in the marketplace.

Investing in a growing regional competency might make sense. Really mature clusters don’t need much additional support. They have already built their systems and partnership. So a growing sector could be the place where the investments make a big difference.

Even though emerging markets might be risky, if you region already has strong momentum in that entrepreneurial area and that mark may have the support of mature adjacent sectors, then it could be a strategic play. You really have to look at the competition before jumping in though.

Looking at cluster intersects can be a game changing strategy, even for your mature sectors. Combining a horizontal with a vertical sector could be a multiplier. For example: Add a IOT focus to a manufacturing or agriculture cluster strengthens both sectors in your region and could create dynamic opportunities. Combining mobile into healthcare or supply chain could amplify all your mature businesses and share the cost of the innovation and R&D.

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I was able to have several follow-up meetings with the Federal EDA and some of the analytics partners. We where exploring some partnerships around the next level of economic big data that could be generated around innovation centers. This could provide much greater insights into regional activities and innovation plus expand the language of cluster development and metrics. This effort will continue as regional cluster planning comes into focus across a number of cities we are currently engaged with. I should also mention that these innovation centers with clear focus clusters are key landing pads for the international corridors programs we are developing to connect global clusters and innovation.